Banks urged to focus money laundering checks on high risk cases

Dutch banks are spending huge amounts of money on anti-money laundering checks that have major consequences for customers, but it is unclear whether the system is actually effective, the national audit office said on Thursday.

An estimated €15 billion to €20 billion is laundered in the Netherlands every year, the audit office said, yet the current system of strict controls does not always lead to useful investigations.

Banks are required by law to report unusual transactions to the Financial Intelligence Unit (FIU), while the sector is closely supervised by the central bank. In recent years regulators have imposed large fines on several banks because their checks were not in order.

Banks have since hired large numbers of staff to monitor customers and payments, with around one in five bank employees now involved in anti-money laundering work.

At the same time, the checks can have serious consequences for ordinary people, who may be asked detailed questions about their finances or even refused a bank account – particularly if they have Middle Eastern or eastern European name.

The audit office looked in detail at how anti-money laundering measures affect three groups in practice: politically exposed persons (mainly former politicians and former judges), religious institutions, and hospitality businesses.

PEPs and religious institutions – particularly mosques and churches with mainly foreign congregations – often report facing intrusive monitoring measures, the audit office said.

As a result, they may be unable to open a bank account, have their account closed, or be prevented from transferring money to family members or businesses in other countries.

Prominent individuals such as former politicians and judges can also face extra scrutiny, which can cause problems for family members trying to open accounts or take out loans.

The audit office urged the ministries of finance and justice to focus checks more on high-risk cases and to reduce unnecessary monitoring.

Last year finance minister Eelco Heinen said the current system may have gone too far, saying the government wants to look again at whether banks can work together on a shared monitoring system to make the controls more effective.

Last October, the big Dutch banks said they expect to shed around 2,600 jobs in their anti–money laundering departments within two years as they turn to artificial intelligence to handle routine work.